Kisan Vikas Patra: Understanding Features, Eligibility, Interest Rates, & Returns
Updated: Nov 6
On April 1st, 1988, the Indian government launched the "Kisan Vikas Patra (KVP)" certificate savings scheme. Purchasing certificates in different denominations from post offices allowed participants in the plan to invest a limitless amount. When the scheme was introduced, the invested amount quadrupled upon maturity, with a 5 ½ year maturity period. In response to public demand and in an effort to revive small savings, the Department of Economic Affairs, Ministry of Finance, Government of India, revived the "Kisan Vikas Patra Scheme" in 2014. At the current rate, the investment in Kisan Vikas Patra (KYP) doubles every 115 months. An adult may buy the certificates for themselves, on behalf of, or to give to a child. Additionally, two adults may buy it together. This guide will go into great detail regarding KVP.
Table of Content
What is Kisan Vikas Patra?
Kisan Vikas Patra (KVP), a small savings certificate programme, was introduced by the India Post in 1988. Its main goal is to help individuals develop long-term financial discipline. The scheme's duration is currently 115 months (9 years and 5 months) according to the most recent update. There is no upper restriction on the minimum investment amount of Rs. 1,000. Furthermore, you will receive twice as much at the end of the 115th month if you deposit a lump sum amount today.
While the scheme originally intended to help farmers save, it is now accessible to everyone. In 2014, the government mandated PAN card proof for investments exceeding Rs. 50,000 to thwart the potential for money laundering. You must provide proof of income to deposit more than Rs. 10 lakhs in KVP. This may include pay slips, bank statements, ITR paperwork, etc. You can deposit money and leave it there for a predetermined amount of time without worrying about any risks. In addition, the Aadhaar number must be provided as verification of the account holder's identity.
Types of Kisan Vikas Patra Certificates
There are three different kinds of KVP Scheme accounts:
Single Holder Type: An adult gets a KVP certificate in this kind of account. Also, it may be obtained by an adult on behalf of a minor.
Joint A Type: When an account of this kind is opened, two adult individuals each receive a KVP certificate. Both holders of the accounts would get the dividend in the case of maturity. Still, only that individual would be entitled to receive the same if another account holder passed away.
Joint B Type: In this account, a KVP certificate is granted in the names of two adults. Upon maturity, the dividend would be given to the survivor or to both account holders, unlike Joint A-type accounts.
Features and Benefits of Kisan Vikas Patra
Assured Returns: You are guaranteed the money, regardless of market swings. Since the rural community was the target audience for this scheme initially, encouraging them to save for rainy days was of utmost importance.
Capital defence: Investing in it is risk-free and not dependent on the market. After the term is over, you will get your investment back plus any profits.
Interest: The number of years invested in Kisan Vikas Patra at the time of purchase determines the effective interest rate. Kisan Vikas Patra (KVP) has an interest rate of 7.5% p.a. for the second quarter of FY 2024–2025 (i.e., the quarter beginning on July 1 and ending on September 31, 2024), compound annual interest. You will obtain higher returns on your money if the interest is compounded.
Maturity: You can access the corpus during the 115-month Kisan Vikas Patra maturity term. KVP maturity proceeds will keep earning interest until you take the money out.
Guidelines for early withdrawal: The account matures in 115 months. However, there is a 30-month lock-in period (2 years and 6 months). Early scheme encashment is prohibited unless the account holder passes away or a court ruling is obtained.
Comfort and affordability: KVP is offered for investment in denominations of Rs. 1,000, Rs. 5000, Rs. 10,000, and Rs. 50,000. There is no upper bound to it. Please be aware that the main post office of a city is the sole location where denominations of Rs. 50,000 are accessible.
Loan against a KVP certificate: Your KVP certificate may be used as security or collateral to obtain secured loans. For these loans, the interest rate is significantly lower.
Nomination facility: Obtain a nomination form from the post office and complete it with the nominee's necessary details. Provide the nominee's birthdate if they are a minor.
Issue of KVP certificates: The KVP Certificate is immediately issued if cash payment is made. If you pay with a cheque, money order, or demand draft, you must wait until the funds have cleared the post office.
KVP Identity: This contains the KVP serial number, the amount, the maturity date, and the amount to be received on the maturity date of the Kisan Vikas Patra Certificate.
Eligibility for Kisan Vikas Patra
Investments in KVP can be made by the following people:
The applicant should be an Indian citizen.
The candidate needs to be older than eighteen
An adult may apply on behalf of a child or an insane person
Investment in KVP is not permitted for Non-Resident Indians (NRIs) or Hindu Undivided Families (HUFs).
Who Should Invest in KVP?
A Kisan Vikas Patra can be purchased from the local post office by any Indian citizen who is at least eighteen years old. Individuals from rural India who do not have a bank account are especially drawn to this. A KVP may also be purchased jointly with another adult or on behalf of a juvenile. Don't forget to provide the name and birthday of the minor's parent or legal guardian. A Trust may purchase one as well. However, an NRI or HUF cannot.
For risk-averse people with extra cash that they might not need anytime soon, KVP is an excellent option. Your objectives and level of risk tolerance determine everything. For example, preferable options for those looking for tax-saving programs include National Savings Certificates, Public Provident Funds, and tax-saving bank FD schemes. The Equity Linked Savings Scheme (ELSS) is available to you if you are willing to assume a certain amount of risk. Therefore, you can capitalise on your financial advantages.
Interest on KVP
KVP is essentially a low-risk investment scheme, offering a viable rate of interest and even doubling the money invested in due course of time. The following table illustrates the interest accrued on the principle of Rs 1000 invested in KVP.
Time Frame | Account Balance |
2.5 years but less than 3 years | Rs. 1173 |
3 years but less than 3.5 years | Rs. 1211 |
3.5 years but less than 4 years | Rs. 1251 |
4 years but less than 4.5 years | Rs. 1291 |
4.5 years but less than 5 years | Rs. 1333 |
5 years but less than 5.5 years | Rs. 1377 |
5.5 years but less than 6 years | Rs. 1421 |
6 years but less than 6.5 years | Rs. 1467 |
6.5 years but less than 7 years | Rs. 1515 |
7 years but less than 7.5 years | Rs. 1564 |
7.5 years but less than 8 years | Rs. 1615 |
8 years but less than 8.5 years | Rs. 1667 |
8.5 years less than 9 years | Rs. 1722 |
9 years but before maturity | Rs. 1778 |
On maturity of the certificate | Rs. 2000 |
Historic Interest Rates of KVP
The following table shows the historic interest rates on KVP during the quarters of the last few years:
Financial Year | April-June (Q1) | July-September (Q2) | October-December (Q3) | January-March (Q4) |
2023-2024 | 7.5% | 7.5% | 7.5% | 7.5% |
2022-2023 | 6.9% | 6.9% | 7.0% | 7.2% |
2021-2022 | 6.9% | 6.9% | 6.9% | 6.9% |
2020-2021 | 6.9% | 6.9% | 6.9% | 6.9% |
2019-2020 | 7.7% | 7.6% | 7.6% | 7.6% |
2018-2019 | 7.3% | 7.3% | 7.7% | 7.7% |
2017-2018 | 7.6% | 7.5% | 7.5% | 7.3% |
2016-2017 | 7.8% | 7.8% | 7.7% | 7.7% |
Steps to Invest in KVP
The steps to investing in Kisan Vikas Patra are shown below.
Step 1: Gather the application (Form A) and complete it with the relevant data.
Step 2: Send the completed form to the bank or post office.
Step 3: The agent should complete Form A1 if the investment in KVP is made through an agency. It is also possible to get these forms from the internet.
Step 4: You must complete the Know Your Customer (KYC) process. Also, provide a copy of your ID and proof of address (PAN, Aadhaar, voter ID, driver's license, or passport).
Step 5: You have to make the deposit as soon as the documents are confirmed. You have several options for making the payment: cash, demand draft made out to the postmaster, pay order or locally issued check.
Step 6: Unless you pay by demand draft, pay order, or check, you will receive a KVP certificate right away. This must be kept secure since you will have to turn it in when you are old enough. You can request that they provide you with the certificate via email.
In brief, make an investment right away if Kisan Vikas Patra appears to be a wise choice and aligns with your financial objectives. It is not too difficult to open and operate. All you have to do is visit the closest post office once with the necessary funds. Additionally, it is now possible to invest in KVP through Department of Post (DOP) online banking.
Documents Required for the KVP Scheme
These documents must be on hand while filling out the Kisan Vikas Patra (KVP) application. These are mentioned below.
Proof of address
Birth Certificate
Identity documentation, including a passport, driver's license, voter ID, Aadhaar card, and PAN.
And a properly completed KVP application form
Taxation on KVP
Interest income from investments made in KVP is fully taxable, and there is no 80C deduction available for it. Every year, 10% TDS is withheld from the interest that is credited. Since the principal and interest must be repaid (which is already taxed at the time of accrual each year), the maturity proceeds are likewise not taxable.
Nomination for KVP
At the time of purchase, single or joint certificate holders may nominate someone by completing Form C's details. If the single holder or both joint holders pass away, you may designate any individual to receive the benefits of the certificate. If the nomination is not made at the time of purchase, it may be made at any point after the certificate is purchased but before maturity by completing the properly completed Form C. This includes single holders, joint holders, and the surviving joint holder. Submit it to the bank representative or postmaster where the certificate is kept on file. On the other hand, if a minor applies for and receives the certificate, no nomination may be made on their behalf. The certificate will be cancelled or changed using Form D if a nomination is submitted in this situation by the holder or holders.
It is necessary for you to submit separate applications for nomination, cancellation, or modification when you have multiple certificates registered on various dates. Such an application will become operative on the registration date and be noted on the certificate. First-time nominees submit their nominations at no cost. There will be a fee of Rs. 20 per application for subsequent nominations or cancellations.
Encashment of Kisan Vikas Patra
A Kisan Vikas Patra Certificate may be obtained at the post office where the KVP was given in order to cash it. You will need to follow particular procedures if you need to cash KVP at a different post office. The identity slip provided at the time the KVP certificate was issued must be submitted in order to cash a KVP. Send a written letter and identity slip to the relevant post office in order to cash a KVP certificate.
Note that you can only withdraw the principal after two years and six months if you wish to do so before the maturity date. KVP may also be prematurely cashed before its maturity, but only in the situations listed below-
Upon forfeiture by a Gazetted Officer or by a pledge
If there are joint Kisan Vikas Patra holders, upon the death of any one of the holders
If directed by a judicial body
Premature Withdrawal From KVP
The Kisan Vikas Patra withdrawal guidelines stipulate that the scheme's lock-in period is 30 months, or two years and six months, even if the account matures after 115 months. Early withdrawal from the plan is not permitted unless the account holder passes away or a court order is obtained.
Transfer of KVP from One Person to Another
The following situations allow for the transfer of a certificate from one person to another with permission from a post office or bank officer:
From a departed individual to their successor.
From the holder to the court or to any individual the court designates.
In the case of a single transferee, from the name of a single holder to the names of joint holders.
From one of the joint holders to another joint holder.
From joint or single holders to an individual.
Additionally, permission to transfer shall only be granted by an authorised postal or bank official in the event that the following requirements are met:
If the transferee satisfies the requirements to obtain the certificate.
The transfer must fall into one of the following categories if it occurs after the period of time from the date of certificate purchase has elapsed, or before the period of one year has elapsed:
A gift given to a close relative out of pure compassion and devotion. In this context, "close relative" refers to a brother, sister, husband, or descendant in the lineage.
Transfer to the holder's heir or designee who has passed away.
Transfer from the holder to the legal tribunal or to any individual the tribunal designates.
Transfer at a scheduled bank, cooperative society, or RBI in line with the certificate pledge.
In the case that one of the joint holders passes away, the transfer will be made in the survivor's name.
Until the minor is still alive, no transfer of a certificate held by or on behalf of the minor is permissible.
Loan Against KVP
A loan against Kisan Vikas Patra may be obtained by the holder. The prerequisites for obtaining a loan against KVP are as follows:
Under his own name, the loan applicant needs to have a Kisan Vikas Patra.
Only personal or business uses are permitted for the KVP loan. There are no speculative ones for which the loan is eligible.
Interest rates and fees for loans against KVP vary throughout banks. The fees change periodically, and some banks may impose a processing fee in exchange for granting a loan.
The loan must be paid back within Kisan Vikas Patra's term.
The bank will determine the loan amount and margin depending on the KVP investment and maturity.
Conclusion
Since the 2014 regulation changes, the KVP plan has become one of the most reliable and worthwhile investment options. The program helps increase the nation's savings rate in addition to giving small investors a safe and secure way to invest. Even while FD (Fixed Deposit) schemes are preferred by the majority of conservative investors, many are choosing and choosing alternate schemes. Because the plan is supported by the Indian government, KVP is seen as a safe investment choice for these investors and gives higher yields than bank FDs.
FAQ
Q1. Can a KVP certificate be transferred to another person?
With permission from the bank or post office, you are able to transfer a KVP certificate to another individual. Furthermore, you can transfer your KVP certificate to another individual by meeting the requirements listed above and getting permission from an authorised postal or bank official. However, until the minor is still alive, you are unable to transfer a KVP certificate on their behalf or on behalf of the held.
Q2. Can my KVP be transferred from the post office to the bank?
Yes, it is possible to transfer your certificate from a post office or bank to another. The process involves completing an application using Form B at the location. All certificates, with the exception of Joint "A" type certificates, require the signature of the holder or holders. In the event of the death of one of the joint account holders, the other may sign.
Q3. Is KVP taxable?
KVP is not qualified for the 80C deductions. Hence, the returns are taxable as usual.
Q4. Is KVP taxable on maturity?
Yes. KVP becomes taxable when it matures. Under this arrangement, there is no tax benefit. The accumulated interest is paid annually and is taxable under "income from other sources."
Q5. Is Kisan Vikas Patra interest taxable?
Every financial year, the interests on KVP are subject to accrual basis taxation, with taxation applied in the same manner as "Income from other sources."
Q6. How can I encash KVP after maturity?
The due amount will be credited to the bank or post office savings account of the KVP holder upon the scheme's maturity. The encashment part is handled by the post office or bank where issued. You must turn in the identity slip that was assigned to you at the time of issuance in order to pay the cheque.
Q7. Is the old certificate valid even after being transferred to another person?
No, a new certificate in the transferee's name with the same issue date as the original will be made available following a successful transfer.
Q8. Can I encash my KVP at a different Post Office after relocating to a different city?
In the event that your identity slip is approved and the Post Office verifies that you initiated KVP, you may cash KVP at any location. If you could encash your KVP at the Post Office of issue, it would be ideal as it would make things much easier for you.
Q9. What happens if KVP is not cashed after maturity?
If the KVP certificate is not cashed after maturity, the holder is entitled to the post office savings interest. The interest rate applies to the entire maturity amount during the specified period. No interest will be paid if the certificate is cashed within a month of the scheme's maturity.</